Disney Renovation; A Master Plan to Restore the Kingdom's Magic

By LAURA M. HOLSON

Published: August 15, 2005

Robert A. Iger does not officially get the keys to the Disney castle for another six weeks, but he is already well along with his restoration plan.

Mr. Iger, the 54-year-old president of the Walt Disney Company, becomes chief executive on Oct. 1 as the handpicked successor to Michael D. Eisner, who ran the corporation with skillful determination for 21 years but has more recently reigned over a troubled kingdom.

When a Delaware judge last week upheld Disney's $140 million severance package granted to Michael S. Ovitz in 1996, after only 14 months as president, it closed one of the last pieces of unfinished, unflattering business from the Eisner era.

Mr. Iger, though, has not been waiting for judges or anyone else to fix problems that festered on Mr. Eisner's watch.

In March, less than two weeks after the board approved his nomination to become chief executive, Mr. Iger dismantled the company's corporate strategic planning group, giving the heads of the film, television, theme park and other divisions the freedom they had long sought to run their own businesses.

In April Mr. Iger traveled to Northern California to sit down with Steven P. Jobs, the chief executive of Pixar Animation Studios, whose years of feuding with Mr. Eisner had threatened the future of the companies' mutually lucrative movie distribution partnership.

And in July Mr. Iger negotiated a truce with Roy E. Disney, a dissident former board member and nephew of Walt Disney, who helped lead a shareholder uprising last year that diminished Mr. Eisner's power and led in part to his decision to retire.

''If anyone had a list of things for Bob to do right away it would be these; figuring out the Roy thing and, at the end of the day, seeing that Pixar and Disney should be partners,'' said Lawrence J. Haverty, associate portfolio manager of the Gabelli Global Multimedia Trust and an investor in Disney stock. ''What Bob has to do now is execute the obvious, brilliantly.''

For his part, Mr. Iger, who has been Disney president for five years, credits Mr. Eisner for letting him start exercising the prerogatives of chief executive even before holding the job. ''Not only did he stand down and get out of the way, but he supported me all along,'' said Mr. Iger in an interview late Friday night. ''Michael has been exceptional in how he handled this transition.''

Only a year ago, few in Hollywood or on Wall Street considered Mr. Iger the right man to succeed Mr. Eisner. The main criticism was that he lacked the corporate gravitas to lead Disney, despite having been the heir apparent at Capital Cities/ABC when Disney bought it in 1996.

But his accomplishments in corporate diplomacy in recent months are quieting such criticism. So is the company's financial resurgence, spurred in part by the revival of the ABC television network; Mr. Iger said a few years ago that he was taking personal responsibility for fixing that business.

On the strength of new hit shows like ''Desperate Housewives'' and ''Lost,'' ABC's operating income surged in the quarterly results announced last week, when Disney reported an overall gain of 41 percent in profit for its fiscal third quarter, to $851 million, on revenue of $7.72 billion.

Many had assumed, even feared, that Mr. Eisner would not cede power easily after two decades. Mr. Eisner became Disney's chairman and chief executive at age 42 after being passed over for the chairmanship of Paramount Pictures. Under him, Disney resurrected its animation business, extended its reach into cable television and onto Broadway and grew to about 117,000 employees worldwide from 28,000.

But in the mid-1990's, the stock price and profits slumped. Disney made expensive acquisitions, including the ABC Family channel and the ABC television network, which was a money-loser for years. And Mr. Eisner was criticized for alienating top executives, most notably Jeffrey Katzenberg, who angrily departed in 1994 after overseeing a string of animated hits like ''Beauty and the Beast,'' ''Aladdin'' and ''The Lion King.''

There was also the debacle with Mr. Ovitz, the powerful Hollywood talent agent in whom Mr. Eisner lost confidence only months after hiring him as president. In more recent years, shareholders lost confidence in Mr. Eisner.

But to the surprise of his detractors, Mr. Eisner has given Mr. Iger considerable leeway. ''I wanted Bob to get on with it and start running the company as soon as possible,'' Mr. Eisner said in an interview on Saturday. ''I'm glad the unnecessary distractions are over.''

One distraction, still not fully resolved, is Disney's fractured relationship with Pixar, the maker of ''Toy Story'' and ''Finding Nemo.''

Last year, after a standoff lasting for months between Mr. Jobs and Mr. Eisner, Pixar said it would end talks on continuing its 14-year partnership with Disney and seek another studio to distribute its films in 2006.

Disney did not like the terms Pixar was demanding, but there was also unresolved tension over whether Pixar sequels could count toward the number of movies Disney was owed under the existing agreement. (Mr. Jobs wanted them to count, while Mr. Eisner said they would not.)